| Management buy-outs is that, manager layer of the company , by using loan capital or by means of stock right trade and other transactions of property right, buy the company's assets to change its ownership structure, control power structure and assets structure, in order to recombine the company and obtain the prospective earnings. It began in the 60's of 20century in U.S.A, and the Stone Group is the first one who do MBO in China. As far as the traditional theory of entrust-act is concerned, reducing the agent's cost is motive power to do MBO. MBO in China is a special civil legal action, which is adjusted by civil law and economic law, with thick administrative color. During the purchasing, managers should obey the laws.Because of the lack of perfect laws to standardize MBO, a lot of questions have appeared in the past practice, in April 2005, State Assets Supervision and Administration Commission of the State Council(SASAC) and Ministry of Finance jointly stipulated that large-scale state-own enterprises were forbidden to carry out MBO, middle and small-scale enterprises were permitted to explore. In setting up the purchasing subject, if the managers are legal subjects still exist doubt; setting up company type subjects will faces some legal obstacles, such as restrict of scale of transferring investment and registered capital. During the financing, it's difficult to managers to raise money through legal channel, because our country forbid bank fund to enter stock market and forbid stock right to hypothecate. In fixing frice, the stock value is not reflected perfectly in our country. Theoretically MBO's own positive role, however, still exists objectively, especially to state-own enterprises reform. So, we should explore MBO in small and medium-sized enterprises, perfect the legal environment of MBO progressively, accelerate system innovation and strengthen the law to supervise to make MBO play appositive role in larger range in the future.
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